Fostering Entrepreneurship: Promoting Founding or Funding?

68 Pages Posted: 7 Feb 2017

See all articles by Thomas F. Hellmann

Thomas F. Hellmann

University of Oxford - Said Business School; University of Oxford - Said Business School; European Corporate Governance Initiative

Veikko Thiele

Queen's University - Smith School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2017

Abstract

Governments across the globe are eager to foster entrepreneurial ecosystems, yet there is no consensus on what policies to use. We develop a theory about the equilibrium consequences of two canonical types of entrepreneurship policies: policies that encourage entrepreneurs to found new ventures, and policies that encourage investors to fund new ventures. We distinguish between a short-term impact on current market activity, versus a long-term impact on future activity. Investing in entrepreneurial ventures requires tacit knowledge that is mainly acquired through prior entrepreneurial experience, implying that the supply of capital depends on successful entrepreneurs from prior generations. Recognizing this intergenerational linkage has a profound impact on the market equilibrium, and the effect of entrepreneurship policies. Our analysis identifies a rationale for using funding polices.

Keywords: Entrepreneurship, angel investors, start-ups, government policies, ecosystem, overlapping generations, steady state

JEL Classification: D53, D92, G28, L26

Suggested Citation

Hellmann, Thomas F. and Thiele, Veikko, Fostering Entrepreneurship: Promoting Founding or Funding? (January 1, 2017). Saïd Business School WP 2017-04. Available at SSRN: https://ssrn.com/abstract=2912941 or http://dx.doi.org/10.2139/ssrn.2912941

Thomas F. Hellmann (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

European Corporate Governance Initiative ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Veikko Thiele

Queen's University - Smith School of Business ( email )

Goodes Hall
143 Union Street
Kingston, ON K7L 3N6
Canada
+1 613 533-2783 (Phone)
+1 613-533-6589 (Fax)

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